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Recession Watch : UK stock market

As soon as the US credit crunch began we saw a significant fall in the UK stock market with investors running for the hills amid concerns the crisis would transfer to the UK in a short space of time. Unfortunately, this doomsday scenario did occur and within a matter of weeks the UK financial sector was in the grip of panic with finance becoming more and more expensive and the UK economy taking a dive.



However, interestingly over the last few weeks, despite the deluge of negative reports on the economy, the UK stock market has rebounded. Led by the UK banking sector, which many now believe is out of the woods, there had been a small increase in confidence even before recent reports suggesting the UK economy may be turning. As we have covered on a number of occasions, the UK stock market is one of the most accurate "information dissemination" markets in the world and is often said to be able to predict the state of an economy up to 8 months ahead.



It is worthwhile keeping a very close eye on the UK stock market as an indicator as to whether the UK economy has finally turned or whether in fact we are seeing the emergence of another false dawn. At this moment in time many people believe the economy is starting to stabilise but we will need more concrete evidence from the financial and business arenas before a final analysis can be carried out.

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